Microgrids are generally understood to be localized electricity systems in which electricity is produced and consumed by the users connected to the grid. The system is increasingly considered to be a valuable additional and alternative way of operating the electricity systems across the European Union (EU) and beyond, especially within the context of the energy transition. Yet, in the EU microgrids are not legally defined. The lack of a legal definition creates uncertainty which limits the system’s potential to allow consumers to take up a more active role in the electricity sector and diversify the energy sources within the electricity mix. This article analyses the use of microgrids from an EU law perspective, identifying the challenges that will be faced by both regulators and microgrid users. Based on an assessment regarding the purpose, size, operation modes, and supporting qualities of the microgrid, this article ultimately provides a basis for developing a legally valid definition suitable for the EU legal framework. EU law, microgrids, decentralized electricity systems, legal regulation, energy transition